Rising Olive Oil Prices Keep Market Guessing

When and how rising wholesale prices for Spanish olive oil will impact on consumers are burning questions as the climb continues.

Major publications including The Economist and the UK’s Observer newspaper have covered the issue in the last week. The latter reported that the UK’s biggest olive oil supplier, Filippo Berio — which said it was hard to buy olive oil because producers were waiting for further rises — had warned it would be forced to pass on the increase to consumers but perhaps not until after Christmas.

In Spain, one major brand is said to have told retailers that, as of October 1, the price of a 1 litre bottle of its refined olive oil — currently sold in supermarkets for less than €3.00 — will rise to €3.99, but so far no such rises have been confirmed.

Meanwhile, wholesale olive oil prices continue upwards as a thirsty Spain ends one of its hottest summers on record. According to Spain’s olive oil price information system POOLred, the average bulk price for virgin olive oil for the week to today is the equivalent of €2.58/kg – up 91c from €1.67/kg in early July when prices starting taking off, €2.63 for extra virgin and €2.52 for lampante.

Two years of dismal harvests ahead?

Manuel León, president of the Olive Oil Futures Market (MFAO), said if it doesn’t rain soon, Spain’s output could be down to less than 800,000 tons of olive oil this harvest – half of the last one, a record 1.6 million tons.

Innoliva sales director Eduardo Hitos Fuentes told Olive Oil Times that while adverse weather – terrible frosts and continuing drought – had already severely reduced this harvest’s prospects, the following one would also be bad if it didn’t rain this fall.

Hitos Fuentes said the simple demand and supply equation had seen wholesale prices start rising but speculation was now also occurring. Another driver was the relatively low production of lampante last season, when lack of rain made harvesting faster and saw greater production of virgin olive oil. There are currently many would-be buyers of lampante and no sellers, he said. Europa Press reported in August that 85 percent of the retail price of olive oil was estimated to be determined by the wholesale price of lampante.

Valencia Fruits said some experts predict wholesale prices could keep rising for a few more weeks and reach a maximum of €3/kg but are likely to fall again in mid-October, when the olive harvest starts in neighbouring Portugal.

And it reported that International Olive Council executive director Jean-Louis Barjol, in comments last Friday to EFEAgro, recognized that while the coming harvest in Spain would be much lower, it remained to be seen how prices will evolve.

Barjol calls for balance

Barjol pointed out that before reaching any conclusions there needed to be an analysis of the considerable stocks of olive oil still on hand (about 600,000 tons) – such as what their storage conditions had been and in which category they could be sold — and also of harvest forecasts for other countries.

As for how high prices might go, Barjol was reported as saying that it would be good to find a level that allowed farmers to make a profit — after very low prices in recent years — but not so high that they harmed the market by reducing consumer sales in a time of crisis.

There are fears the rising prices could spark an increase in theft of olives, farm equipment and olive oil, Spain’s ABC newspaper reports.

Police have started setting up what will total 1,500 identification points in the province of Córdoba where for five months they will be on the lookout for suspicious activity.

Ignacio Fernández de Mesa, president of agricultural union Asaja, said more theft is likely because “a kilo of olives is worth much more than last year – 50 percent more.”

Table olives

The table olive harvest is underway in parts of Andalusia but, according to Olimerca, that market has its own problems and many producers plan to instead dedicate a large share of their production this year to olive oil production, given the good prices.